Follow the World Bank procurement guidelines to prevent corruption and abuse

— Koon Yew Yin
The Malay Mail Online
August 2, 2014

AUGUST 2 — The World Bank has procurement guidelines which all the borrowers of Bank funding have to follow. The guidelines include the system of calling tenders. It is a system which has helped to prevent corruption even in the most corrupted countries in the world.

Malaysians are getting fed up with the government’s failure to reform the tender system as well as to check corruption and abuse which is costing us billions of ringgit annually, and bleeding the country’s finances dry.

Although the Government has appointed a minister, Paul Low, to take charge of the implementation of transparency in the government, it is clear that he is getting nowhere. Senator Paul Low has claimed that he is highly motivated in promoting and implementing new transparency procedures in order to curb corruption and cronyism. Well, being motivated is one thing but running around in circles and establishing another layer of bureaucratic smoke and mirrors has been the main outcome of the Minister’s more than one year in office.

Implement the World Bank’s procurement guidelines

From my experience in business there is a simple way to curb corruption, abuse and leakage in Malaysia.

This is by totally abandoning the system of negotiated tenders and by having true transparency but not transparency of the Paul Low or bogus MACC kind.

In its place we should follow the guidelines for open tenders and procurement laid down by the World Bank and other international development bodies.

When my colleagues and I successfully bid for a few of the contracts in the huge Muda Irrigation scheme project financed with World Bank funding in the 1960s, this was the system which we had to follow.

The government engaged a reputable engineering consulting firm which has had experience with similar projects to put up a proposal and to open the project bidding to all contractors to tender. The most important thing to note is that the consulting company responsible for the tender process should be independent and should have no interest whatsoever in the project implementation. This ensures that there is no hanky panky or “insider trading”. After the contract is awarded, the consultant makes sure that the project is completed within cost and scheduled time.

All the contractors must be prequalified based on their technical and financial ability. All contractors must submit tenders conforming to the original design so that the cheapest tender can be selected. If all the contractors are prequalified, the government tender board has only to look at the tendered price.

It is important not to allow anybody from the government to negotiate with any contractor to avoid corruption.

Transparency and accountability requires that all documents on the proposal be placed in the public sphere – not just limited information but detailed and full breakdowns in accordance with international best practices. This will ensure public monitoring and curbing of cost overruns which have plagued all mega projects in the country.

On the tender opening day all contractors and the representatives of press should be invited to witness the opening of bids and their tender prices should be publicly announced.

All contractors have to submit their tender according to the original design provided by the appointed consultant.

A contractor can also submit an alternative design provided that the price is cheaper and the quality is not inferior.

Additional safeguards

Besides the Bank’s guidelines, I would like to propose the following safeguards since open tenders alone will not ensure a fool proof no-abuse procurement system for mega projects. These additional safeguards are based on my experience as a Chartered Engineer and as a member of the Malaysian Board of Engineers for three two-year terms

Never invite contractors to submit project proposals for any mega project because each contractor will submit his own planning and design which will be impossible for the tender board to evaluate. You cannot compare the cost of an apple with the cost of an orange, a banana or a pineapple.

A contractor should not be permitted to take on the role of the engineering consultant responsible for design as well as that of the role of a construction contractor responsible for the project implementation as the two roles are of conflicting interest. If the company is permitted to do so, it will lead to public perception of abuse and corruption.

For mega projects, it is cheaper to employ a really qualified consultant to design the whole project rather than to ask each contractor to provide designs for different phases. The latter is false economy and will result in ballooning of costs.

Just say “No” to negotiated tenders

In summary, the whole procedure of prequalifying contractors, calling tenders, evaluating and awarding the contracts must be carried out in a transparent way to avoid any suspicion of corruption. Such a system of open procurement is effective and can bring change even to the most corrupt country.

Why is it not followed and why do we still have the system of negotiated tenders which was established by former Prime Minister, Dr. Mahathir, and which opened the door to corruption on a grand scale in the country is a question any fool can answer. It can be safely said that hundreds, if not thousands of billions of ringgit have been lost because of this system of negotiated tenders and its associated abuse and cronyism.

Pakatan state governments must also say “No”

It is important for the public to ask this question not only for federal government projects but also for state initiated projects of the Pakatan governments. Take for example the recent news report that the construction giant Gamuda Bhd is the favourite to land the job as the project development partner (PDP) to oversee the implementation of key components of the integrated transportation plan on the island of Penang. Firstly, it is clear that Gamuda and all the other companies reported to be in the running for the massive multi-billion dollar project do not have any experience to be in the position of the overall design consultant.

They all are not engineering consultants. They all are construction contractors. Gamuda might have constructed the tunnel in Kuala Lumpur but they did not design it.

Secondly, CIMB Research has found it “pleasantly surprising” that the Penang state government opted for the Project Development Partner (PDP) structure similar to that of the Klang Valley MRT which has been heavily criticised for cronyism and abuse. From the rakyat’s experience, what is “pleasantly surprising” to contractors will definitely be unpleasant and disastrous for the public.

Alarm bells must be raised and concern expressed if such projects are given out even if supposedly on an improved or modified system of negotiated tender. Such a system has been defended by those in power to be more accountable or transparent and free from abuse or corruption. This is patently false.

Conclusion

Nothing less than a truly open, fully transparent and fully accountable tender system and process is, in my opinion, going to work if Malaysia is to check corruption and abuse.

If the Najib administration, Paul Low, and the Pakatan state governments, really want to curb corruption and ensure good governance, accountability and transparency, they should stop farting around. The system to help bring it about is easily available – just follow what I have provided here.